With a certain periodicity, sudden and lively debates develop in Italy on the need for increase the use of electronic payments and in particular of payment cards. The Monti government happened to be interested in it, then the Letta government and now the Renzi government, which intends to launch a series of measures ranging from raising the cash threshold to the possibility of choosing cards to pay for coffee and newspapers.
Indeed, this second initiative is being carried forward by some sectors of the parliamentary opposition and would allow micro-transactions, from 30 euros and below, to be settled with plastic money. In essence, the proposal aims to counterbalance the introduction of the new cash threshold of €3000 by tracing low-value transactions, where this is requested by the holder of a payment card. Beyond the commendable intentions of the proponents, the obligation to accept cards - like many other obligations incumbent on the sector - could have counterproductive effects which would end up facilitating cash payments, due to the structural characteristics of the payments industry in Italy, which are completely peculiar compared to the European and international context.
Let's see what seems to us more significant, with the help of the ECB statistics referring to 2014, the latest available (Payment Statistics, October 2015). In our country, the very low weight of non-cash transactions both in total number and per capita (79 against 202 of the EU average), is matched by an articulated network of access to payment circuits which ranges from the number of bank and post office branches ( approximately 45.000), the tens of thousands of ATMs located in public places, the number of cards in circulation (almost 100 million), ending up with the POS network. The latter is the largest among European countries, reaching almost 2 million units, against 1,6 million in France and 1,7 in the United Kingdom.
As the late Tommaso Padoa-Schioppa observed a few years ago, highlighting these excessive infrastructural costs, we have created stations and built platforms, but we are not yet capable of carrying trains full of passengers. And the question of why we have not yet been able to reduce the use of cash in our economy, indeed accumulating, vis-à-vis our competitors, a greater lag compared to the one existing at the beginning of the long recession remains the dilemma to be resolved . And this, it should be noted, has continued to happen despite the fact that the limit on cash transactions was already set at 1000 euros four years ago. With the transition to Sepa, this discrepancy has become even more evident.
We are connected with stations throughout Europe (platforms and circuits of international interoperability) and we have new fast, safe and equal trains for all citizens of the Union (represented by Sepa compliant operations, i.e. by credit transfers, direct debits and with cards), but travelers are still very few. Metaphor aside, our economy has produced in 2014 less than five billion transactions, against the almost 20 billion relating to each of the major European economies. Compared to 12% of European GDP, we weigh only 4% in terms of transactions other than cash. The economic and market implications are evident and help to understand the futility of managerial interventions on electronic payments and in particular on cards.
The average number of transactions carried out daily on Italian pos is only 3, for an average value of around 70 euros. As the commissions which remain the responsibility of the traders, are, on average, close to 2% of the value of each transaction, the cost of an average card transaction can be estimated at between 2 and 3 euros, as a synthesis of the fixed costs of installation and connection of the POS and the variable costs of management of the same and of those connected to the single operation. The convenience for transactions of less than 30 euros, with commission set by law at around a few thousandths, is therefore non-existent and the merchant would be required to carry it out at a loss, if it became illegal to convince the customer to pay in cash.
One can easily imagine the circumvention of such a provision, with the presumed reduced effect on the expected outcome of the measures under construction in the Stability Law. In a nutshell, it would overturn the essence of the tourist test proposed years ago by Rochet and Tirole, the latter Nobel Prize winner in 2014 precisely for studies on the economics of payment systems and instruments. With this test, the level of the commission for accepting the card by the merchant was determined, which had to comply with the condition of remaining structurally lower than the cost of cash.
In practice, precisely in contrast to that test designed to encourage payment by card, the many distortions of our market mean that it is much more convenient for merchants to receive payments in cash than those with cards. In our opinion, this is the real disincentive factor for the development of electronic transactions, completely independent of more or less marked attitudes towards tax evasion.
In addition, it should be considered that, starting from this month, the lower margins deriving from the lowering, which occurred due to the European regulation approved during the period of the Italian presidency of the Union, of the so-called interchange fees, will in all probability be compensated by card issuing intermediaries by raising others costs borne by the end user, such as the annual fees associated with holding the card. See on the topic the article on Firstonline from a few days ago.
In fact, the impact will not be the same for all countries, resulting more favorable for those that will be able to spread it over a greater number of transactions. It cannot be excluded that for us the gap with the other systems will widen even more. In conclusion, we reiterate our strong opposition to dirigiste interventions, believing that the market can develop only by finding its own economic conveniences and reasons for being, without the many obligations of the controllers risking causing opposite effects to those desired. The Italian payments market is still too feeble to support policies whose costs cannot be diluted to the same extent as our competitor systems, characterized by very different dimensions of the market for transactions other than cash.
